Bond Loan Programs: Income Limits, Property Restrictions, and MLO Qualification Steps

Bond loans are mortgage products funded through tax-exempt mortgage revenue bonds issued by state housing finance agencies. They typically carry below-market interest rates and are paired with down payment assistance grants or second mortgages. MLOs must be approved by the specific HFA to originate these products.

How Income Limits Are Set

Bond loan income limits are set by the IRS at the federal level based on area median income, typically ranging from 80% to 140% AMI depending on the state program and property location. States have latitude to set their own limits within this federal framework. Most programs use the gross annual income of all borrowers on the application (and sometimes all adults in the household, as with USDA). Income limits are updated annually when HUD publishes new AMI figures.

First-Time Homebuyer Restrictions

• ✦Most bond loan programs require that the borrower not have owned a principal residence in the past 3 years
• ✦Veterans are often exempt from the first-time homebuyer requirement under federal IRS guidelines
• ✦Targeted areas (census tracts with high unemployment or low median income) typically waive the first-time homebuyer restriction
• ✦The 3-year lookback applies to ownership, not occupancy -- a borrower who was on a title but did not occupy the property may still be ineligible

Property Restrictions

Bond programs typically restrict the purchase price of the property to no more than 90% of the area average purchase price, with higher limits in targeted areas. Manufactured homes, multi-unit properties, and vacation homes are usually ineligible. The property must be a primary residence, and some programs restrict the square footage or age of the home.

MLO Approval Process

To originate HFA bond loans, the MLO's employer must be an approved participating lender with the relevant state housing finance agency. Individual MLOs typically complete HFA-specific training (often 4 to 8 hours) and receive a certification number that must appear on each loan submission. Programs and requirements vary significantly by state, so MLOs should contact their state's HFA directly.